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 Introduction to LNG

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This briefing paper is the first in a series of articles that describe the liquefied natural gas (LNG) industry-technology, markets, safety, security and environmental considerations and the growing role LNG may play in the nation's energy future. This paper also introduces the reader to LNG and briefly touches on many of the topics relating to the LNG industry. The second paper, LNG Safety and Security, deals with the safety and security aspects of LNG operations in more detail. A third paper, The Role of LNG in North American Natural Gas Supply and Demand provides an in-depth analysis of why additional LNG will be needed to meet U.S. energy demand in the near future. All three papers, plus supplemental information, are available in a complete online fact book, Guide to LNG in North America.

LNG is the liquid form of the natural gas people use in their homes for cooking and heating. Natural gas is also used as fuel for generating electricity. Natural gas and its components are used as raw material to manufacture a wide variety of products, from fibers for clothing, to plastics for healthcare, computing, and furnishings. Natural gas makes up about one-fourth of all energy consumed in the United States each year. The most common use of LNG in the U.S. is for "peakshaving." Peakshaving is a way local electric power and gas4 companies or utilities store gas for peak demand that cannot be met via their typical pipeline sources. Peakshaving can occur during the winter heating season or when more natural gas is needed to generate electric power for air conditioning in the summer months. The utility companies liquefy natural gas when it is abundant and available at off-peak prices, or they purchase LNG from import terminals supplied from overseas liquefaction facilities. When gas demand increases, the stored LNG is converted from its liquefied state back to its gaseous state, to supplement the utilities' pipeline supplies. LNG is also currently being used as an alternative transportation fuel in public transit and in vehicle fleets such as those operated by many local natural gas utilities companies for maintenance and emergencies.

Natural gas comes from reservoirs beneath the earth's surface. Sometimes it occurs naturally and is produced by itself (non-associated gas), sometimes it comes to the surface with crude oil (associated gas), and sometimes it is being produced constantly such as in landfill gas. Natural gas is a fossil fuel, meaning that the natural gas we produce from the subsurface is derived from organic material deposited and buried in the earth millions of years ago. Other fossil fuels are coal and crude oil. Together crude oil and natural gas constitute a type of fossil fuel known as "hydrocarbons" because the molecules in these fuels are combinations of hydrogen and carbon atoms.

The main component of natural gas is methane. Methane is composed of one carbon and four hydrogen atoms (CH4). When natural gas is produced from the earth, it includes many other molecules, like ethane (used for manufacturing), propane (which we commonly use for backyard grills) and butane (used in lighters). We can find natural gas in the U.S. and around the world by exploring for it in the earth's crust and then drilling wells to produce it. Natural gas can be transported over long distances in pipelines or as LNG in ships across oceans. Natural gas can be stored until needed in underground caverns and reservoirs or as LNG in atmospheric tanks. Transportation of LNG by truck takes place in the United States on a limited basis. Such transportation is more common in countries without a national natural gas pipeline grid. Truck transport of LNG it could grow in the United States if LNG niche markets, such as use of LNG as a vehicular fuel, develop.

4 We use the term "gas" as shorthand for "natural gas." Our use of this shorthand form is not to be confused with "gasoline", the most heavily used vehicle transportation fuel. Gasoline is manufactured from crude oil which, as noted in the text, also is a fossil fuel and is often found together with natural gas in underground reservoirs.